Smart Investor Malaysia


Crypto Investment: A Very High Risk Game, Are You Sure You’re Up To It?


“Wen lambo?” or “Wen moon” are just some of the phrases that is quite common in the crypto world. It is a way to ask crypto investors on when they are going to get rich with their crypto investment. The misspelling looks cool in a way, but investment is actually serious business.

Crypto investment is considered to be a very high risk investment with a very high potential return, the question is do you really want to invest your hard-earned money into it?


Fancy yourself a return of 16,000% per year? It is possible with crypto investment, in fact there were two cryptos that managed to achieve this staggering return on crypto investment in 2021.

Imagine putting in RM100 in 1st January 2021, your crypto investment would be worth RM16,365 by 31st December 2021. Now imagine investing RM1,000, by the end of the year the crypto investment in The Sandbox will be worth RM163,653.

Sounds too good to be true, right? But that is what happened last year.

99.99% Loss In 2 Days


On 9th May 2022, the whole world was shocked when Luna comes crashing down – losing 99.99% percent of its value in just 48 hours. Who would have thought that Luna was once a top 10 cryptocurrency in terms of market capitalisation, would be brought down to its knees in a way that was unimaginable.

Well, that’s crypto for you. You can make big money, and you can also lose it all. We managed to talk to a few financial planners for their advise on crypto investment.

“I won’t advise my clients to invest into crypto investment unless they are higher risk investor and I see they are matured enough for this type of investment. Normally even if they are, we would work out a small portion of their assets or net worth to be invested in alternative investments, which is not more than 10%,” says Ng Ka Hoe, Founder of J Advisory, a personal finance academy.

Ng Ka Hoe, Founder of J Advisory

Before You Start Investing In Crypto

According to Ka Hoe, he would ensure that his clients understand the following before embarking on their crypto investment:

  • What are the alternative investments’ underlying assets?
  • What are the risk involved?
  • Have they invested into traditional investments such as property, stocks and unit trusts? If they haven’t, why not?

It is important not only for the financial planner to understand what makes their client’s emotional ticks, but it is more important for the client
themselves to know and understand their own emotions, as it is truly the investor’s emotions that makes or breaks their investment.

Don’t Go All In With Crypto

Essentially, crypto assets are assets that are non-income generating but more for the crypto investment objective for capital gain. While it is undeniable that crypto currency has helped make many new millionaires, for this wealth to be sustained into the future, one may want to explore how this new wealth can be protected or kept, so that even if the value of the asset class reverses its course, this person will not be knocked back to the ‘pre-crypto’ life.

“Of course, it is perfectly fine if we remain having 100% of our wealth be invested in crypto assets. However, that will also mean we tie our future
financial health and possibility in life to a single asset class,” opines Kevin Neoh, a licensed financial planner and NextGen Money Coach.

kevin neoh
Kevin Neoh, licensed financial planner and NextGen Money Coach

Don’t Invest In Crypto

Meanwhile there are also opinions on the other side of the fence that warns against investing in crypto.

“Ask yourself when it comes to crypto, are you investing, trading, speculating or gambling?” says John Chan, CEO of YES Financial, a financial advisory firm.

John Chan, CEO of YES Financial

Apparently, we ourselves are confused with the terms. Trading or investing in crypto may incur a significant level of risk, even worse if you are using an unregulated or an unlicensed platform.

Conventionally, when a person is betting on horse racing, they will tell you all sorts of stories and logic with regards to horse riding. When a person is speculating on crypto, they may tell you all kinds of fintech and futuristic tech stories about blockchain or even the recent hot topic of Metaverse and NFTs to push up prices.

In conventional gambling, there are licensed casino and the underground operators. Why do some governments grant casino a license? The most common reasons are due to profit making, demand and the need to safeguard public interest through monitoring and control.

The Myth Behind Decentralisation

Everyone wants to have freedom, and nobody likes to be controlled. Some level of freedom is good but it would be a disaster if there is absolute freedom.

Imagine that you are living in a place with no government in power What would be the scenario?

“When there is no effective government, there are bound to be warlords or mafias controlling the area. Is it a safe place to stay then?” mentions John.

Instead, there would be chaos all over as everyone will be fighting for power.

Scarcity, Really?

Bitcoin is called Digital Gold as there is a maximum supply of 21 million Bitcoins. This means that Bitcoin has a unique feature of scarcity. This is
where people seem to illustrate the scarcity of Bitcoin to Gold, as there is a limited supply of Gold available on our planet.

However, gold exist and play its role in civilization since ancient times as precious metal, jewelleries, commodity, storage of value, medium of transfer, barter trade, technology components, currencies etc. It is kept by government and central banks as reserves.

“Gold is a natural resources and is not created by human beings. Unlike cryptocurrencies that are created by humans and there are now more than
19,000 cryptocurrencies in existence,” shares John.

Ask yourself, is ‘scarcity’ real then?

Crypto As Legal Tender?

According to BIS Annual Economic Report 2018, for cryptocurrencies with decentralised trust model such as Bitcoin, each user needs to download and verify the history of all transactions ever made. This has the effect of slowing down transaction processing time, making it not scalable to facilitate day-to-day retail payments.

Compared to major international cards networks which is able to process 2,000 to 3,500 transactions per second, Bitcoin is only able to process 3.3 transactions per second.

“Most cryptocurrencies are not likely to be used as payment instruments primarily because they do not exhibit the universal characteristic of money. Not to mention the price volatility, vulnerability to cyber attack, lack of scalability, not a good store of value, payment method and medium of exchange,” John emphasized.

As of March 2022, 87 countries are exploring the issuing of Central Bank Digital Currency (CBDC), according to the Atlantic Council. While CBDC may
adopt blockchain or Distributed Ledger Technology (DLT), CBDC differs from normal crypto as CBDC is legal tender and is backed by a claim on the central bank. Unlike cryptos that are not legal tender and have no intrinsic value.

Bank Negara Financial Sector Blueprint 2022-2026 stated that they are looking into CBDC through multiyear exploration, starting with Phase One via Project Dunbar.

Comparison of CBDC, stablecoins and non-backed digital assets. Source: Financial Stability Board (2020), “Enhancing Cross-Border Payment
System: Stage 1 Assessment Report to G20”

Asset Allocation Is Important

At the end of the day, there is no one investment that suits everyone. It will be best if you diversify your investments into several asset classes, such as stocks, properties, unit trusts, robo-advisors, fixed deposits, bonds etc.

There should be a mixture of low risk investments with low returns, some in medium risk investments with medium returns, and some in high risk
investments with high returns such as crypto investment. Because you never know with crypto, you can go big but you can also go home with nothing.

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